Apollo Quarterly Net Income Drops as Enrollment Declined

By John Lauerman -
Jan 8, 2013

Apollo Group Inc. (APOL), owner of the
University of Phoenix and the biggest U.S. for-profit college,
said first-quarter earnings fell 11 percent as new enrollment
declined for a third straight quarter.

Net income for the three months ended Nov. 30 decreased to
$133.5 million, or $1.18 a share, from $149.3 million, or $1.14,
a year earlier, Phoenix-based Apollo said today in a statement.

Competition for students has increased as more traditional
universities have begun offering online courses that were once
dominated by for-profit colleges. Apollo and its for-profit
college competitors have faced scrutiny the past few years from
state attorneys general and the U.S. government over their
recruiting practices.

“The visibility around new enrollment is still cloudy and
thus it’s still too soon to recommend owning the shares,” said
Peter Appert, an analyst at Piper Jaffray & Co. in San Francisco
who has a “neutral” rating on the stock.

The company is also expecting to receive a draft report
from its accreditor, the Higher Learning Commission, said
Gregory Cappelli, Apollo’s Chief Executive Officer, during a
conference call with analysts and investors. He said the company
believes it will be placed on notice, which would require
follow-up reports and action.

An institution is placed on notice if it is “pursuing a
course of action that could result in its being unable to meet
one or more of the Criteria for Accreditation,” according to
the commission’s website.

Shares Decline

Apollo shares fell 6.2 percent in after-hours trading on
the Nasdaq Stock Market to $19.65, after dropping 2.6 percent to
$20.94 at the close in New York. The company has lost 63 percent
of its value in the past 12 months, while an index of 13 for-
profit colleges has fallen 48 percent.

As of Nov. 30, 319,700 students were enrolled in Apollo
degree programs, down 14 percent from a year earlier. New
students signing up for classes fell 15 percent to 54,100.

The company said profit excluding some items was $1.22 a
share, topping the 90-cent average of analysts’ estimates
compiled by Bloomberg. Apollo cut total expenses by 9.4 percent
in the period, led by a 30 percent drop in admissions advisory
costs.

Revenue fell 10 percent to $1.06 billion from $1.17 billion
a year earlier. Analysts had projected sales of $1.03 billion.
Sales for fiscal 2013 will be $3.65 billion to $3.75 billion,
Apollo said. That forecast is below the average $3.78 billion
estimate of analysts.

(Apollo will hold a conference call to discuss the results
at 5 p.m. New York time today. For the webcast, go to events tab
on: http://investors.apollogrp.edu)